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International Journal of Training and Development 17:1

ISSN 1360-3736
doi: 10.1111/ijtd.12002

Return on investment for workplace

training: the Canadian experience
Jennifer C. Percival, Brian P. Cozzarin and
Steven D. Formaneck
One of the central problems in managing technological change
and maintaining a competitive advantage in business is
improving the skills of the workforce through investment in
human capital and a variety of training practices. This paper
explores the evidence on the impact of training investment on
productivity in 14 Canadian industries from 1999 to 2005. Our
productivity analysis demonstrates that in 12 out of 14 industries, training had a positive effect on productivity. However,
when the analysis is put within a financial context, the return
on investment was positive in only four industries. Faced with
negative rates of return, why should managers in most of the
industries in the study promote investment in training? Probably the best explanation is that new technology requires an
investment in training. The investment in training is necessary
just for the firm to maintain its current labour productivity.
Employee turnover necessarily impedes the efficacy of training,
because trained workers leave, and untrained workers arrive.
Thus, training in this instance again is necessary just to maintain current labour productivity.

Introduction
One of the central problems in managing technological change and maintaining a competitive advantage in business is improving the skills of the workforce
through investment in human capital and a variety of training practices. Canadas

Jennifer C. Percival, Associate Professor, Faculty of Business and Information Technology, University of Ontario Institute of Technology, Oshawa, ON, Canada. Email: jennifer.percival@uoit.ca. Brian P.
Cozzarin, Associate Professor, Department of Management Sciences, University of Waterloo, Waterloo,
ON, Canada. Email: bpcozzar@uwaterloo.ca. Steven D. Formaneck, Assistant Professor, School of
Business, American University in Cairo, New Cairo, Egypt. Email: sdforman@aucegypt.edu
This work was supported in part by the Canadian Council on Learning, Work and Learning. Data were
supplied by the Research Data Centres Program (http://www.statcan.gc.ca/rdc-cdr/index-eng.htm).
2013 Blackwell Publishing Ltd.

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International Journal of Training and Development

competitiveness, however, has been falling in recent years. The World Competitiveness
Yearbook (IMD International, 2009) reports that Canadas competitiveness has fallen
from between 1113th in the world to 16th place in 2009. One way to close the competitiveness gap is through employee training. In Canada, it was estimated that training expenditure was $746 (US dollars) per employee (Conference Board of Canada,
2007), while the USA spent US$1202 per employee (Bersin & Associates, 2009) and the
UK US$2728.
In many industries, relevant and effective training programmes have been important
factors driving the growth of firms and improving their performance. Although all
HRM practices support the creation of a competitive advantage through human capital,
training is the primary activity which prepares employees and creates a qualified,
flexible workforce (Bartel, 1994). In particular, Aragon-Sanchez et al. (2003) argue that
the investment in training is still relatively low due in part to the fact that few managers
or senior executives evaluate the effects on training at the establishment level and
therefore do not know or understand the economic impact of investment in training.
Training is also only one way in which employee learning occurs, and therefore the
investments made in training require analysis in order to determine if there is sufficient
evidence to support a significant return on investment (ROI) for the firms investment
(Tharenou et al., 2007).
This paper will explore the evidence on the impact of training investment on productivity in 14 Canadian industries. We consider both classroom training expenditures
and on-the-job training expenditures in establishments spanning a 7-year time frame
from 1999 to 2005 to determine the cumulative return on training. We will identify the
longitudinal impact of training over time and determine if there are industry-specific
patterns of returns. This paper contributes to the existing literature by investigating the
link between knowledge accumulation over time and productivity using establishment
level data for both manufacturing and service sector industries.

The relationships between training and productivity and training and

financial return
Many researchers have found that there exists a positive relationship between workplace training and profitability, and workplace training and productivity (Barren &
Loewenstein, 1989; Bartel, 2000). While some studies discovered that increases in
training can improve labour productivity and offer increased ROI, few papers have
addressed the cumulative ROI provided by complementary training practices with
respect to productivity at the establishment level (Cassidy et al., 2005). Cassidy et al.
(2005) argue that it is important to further analyse and understand knowledge accumulation at the establishment level as this will complement existing knowledge at the
macro-level (accumulated industry or country results). It is important to have an
understanding of the micro-impact as this is where the investments are made, and
these decisions drive the macro-level results.
There is a limited understanding of the importance of training in the service sector as
well as a limited understanding of factors influencing decisions to choose between type
of training activities and modes of implementation (for example, on-the-job or in the
classroom). Training has often been criticized as being too expensive, not transferring
to specific job tasks and not improving the profitability of the firm (Caudron, 2002;
Wright and Geroy, 2001). Turcotte et al. (2003) found that employers tend to believe that
the modes of training (particularly, on-the-job vs. classroom) are complementary. They
also found that the size of the firm has a significant impact on the incidence and
intensity of training provided. Small businesses also tend to invest in a different set of
training practices and modes than their larger counterparts (Leckie et al., 2001). This
could be due to the constraints on small firms to absorb the possible temporary
reduction in productivity that may occur during classroom training. This may result in
a higher proportion of on-the-job training practices in smaller firms. Cost is also a
major constraint to small firms investing in training as they do not enjoy the
ROI for workplace training
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economies of scale of larger firms for offering formal in classroom training initiatives
(Rabemananjara & Parsley, 2006).
The majority of previous studies have focused on macro-level analysis or the impact
of training on individuals. Tharenou et al. (2007) conducted a thorough literature
review and analysis of the existing evidence of the effects of training on organizationallevel outputs. They found that there is little theoretical development on the impact of
training on organizational effectiveness and that the measure of training varied widely
in the studies. Tharenou et al. (2007) also found that many of these studies rely on
perceptual outcome variables where the number of significant results is much greater
than when objective outcome measures are used. This suggests that managers perceptions of the impact of training may be much higher than the measurable effects. The
authors also express concern that just below 60 per cent of the studies rely on the same
surveys to measure training and productivity which may be inflating the number of
significant findings. The present study will extend the current set of results [and
address many of the limitations expressed by Tharenou et al., (2007) ] by using a
different dataset as well as having a relatively large sample size over seven consecutive
years.
Now, we would like to highlight some analyses which measure objective outcomes
relative to training investment. Cassidy et al. (2005) studied knowledge accumulation at
the plant or firm level in Irish manufacturing industries. Using only 2 years of data,
they found that productivity-enhancing effects of knowledge accumulation are found
in domestic firms but not in foreign multinationals. Holzer et al. (1993) found that
firm-sponsored training aided in reducing the scrap rate in manufacturing plants (i.e.
it provided quality enhancement). Using data from 1983 and 1986, Bartel (1994) found
that investment in training in 1983 resulted in improved productivity in 1986. Using
data from the US National Employers Survey from 1993, Black and Lynch (1996) found
support for a positive relationship between investments in training and productivity.
Aw and Batra (1998) considered both research and development (R&D) and training in
Taiwan. Due to the limitations of their dataset, they were unable to differentiate
between training and R&D investment amounts. They did, however, find a positive
relationship between R&D and/or training investment and productivity. AragonSanchez et al. (2003) found that training positively impacted future productivity but
that the impact in the subsequent year was small. They hypothesized that the effect
would continue and might grow but left this analysis for future research (as their
dataset only contained 1 year of observations).
Our study will extend the literature on the impact of training on productivity. We too
will analyse the link between training investment and subsequent productivity. The
difference is that our training data spans 7 years over thousands of establishments
within 14 industries. Table 1 summarizes training expenditures in Canadian dollars
(CAD) by industry sorted by expenditure per employee. Interestingly, average productivity is not perfectly correlated with average training expenditure, with a correlation
coefficient of only 27.5 per cent.

Model
We are interested in the objective outcome measures related to training investment.
Productivity can be measured as firm output or labour productivity (output per
employee). The logical choice for a conceptual model is a production function (Blinder,
1990; Lazear, 1998, 2009; Levinsohn & Petrin, 2003). See Appendix I and Lazear (1998,
pp. 3643) for an elaboration.

Yit = f (K it , Lit , Eit , Mit , TSit )

(1)

where i, t represent firm i observed at time t. Y is the firms output in physical units, K
is the firms capital stock, L is the number of workers employed, E is energy use
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ROI for workplace training

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23

All industries
Finance, insurance
Communication, utilities
Forestry, mining, oil, gas
Information, culture
Primary product mfg
Capital intensive tertiary
Secondary product mfg
Business services
Transport, warehousing
Construction
Education, health
Labour intensive tertiary
Real estate
Retail trade

155
452
336
198
130
228
269
108
158
218
137
147
90
151
72

1999

152
463
306
201
258
261
239
201
168
214
162
80
115
69
75

2000

149
351
226
189
337
212
169
311
181
168
154
118
75
136
81

2001

153
300
321
268
227
176
253
157
243
152
153
120
134
107
87

2002

2004

($ per employee)
181
191
516
468
340
405
358
495
403
293
221
312
377
174
226
213
269
225
163
143
124
257
197
187
119
137
87
134
77
113

2003

169
460
353
385
203
270
147
215
184
151
187
205
155
117
84

2005

Table 1: Training expenditures from 19992005 (Canadian dollars)

164
430
327
299
264
240
233
204
204
173
168
151
118
114
84

Training
19992005

203,122
195,743
165,968
476,044
163,184
201,759
174,122
195,905
163,771
306,504
205,552
101,052
143,357
230,058
120,692

Productivity
19992005

measured in KWh but more often in terms of expenditure, M is materials use most
often in expenditure form. The term TS is the capital stock of training, which is
different from simple investment in training each year. The capital stock measures the
total existing value of training expenditures past and present. Unfortunately, we do not
have a training capital stock variable (at this time nobody does). The best we can do is
to model the annual investment in training at a given location. This is modelled below
in equation 2 where TRN represents the annual investment in training. The lagged
terms indicate that investments may require time to affect productivity (i.e. learning
and integration into existing system effects).

Yit = f (K it , Lit , Eit , Mit , TRN it , TRN it 1, TRN it n )

(2)

The effects on productivity are conditional on firm-specific factors, such as whether a

union is present. Thus, our hypothesis is that training investments, past and current,
should increase labour productivity within the workplace.
Below is the empirical equation we used for estimation of trainings effect on
productivity:1

Yit = it + it Union + it Prof _ Tech + it R & D + i 0 TRN i 0 + i1 TRN it 1

+ i 2 TRN it 2 + i 3 TRN it 3 + i 4 TRN it 4 + i 5 TRN it 5 + i 6 TRN it 6 + it

(3)

where Union is the percentage of employees who are under union contract, Prof_Tech is
the proportion of the total workforce who are professional or technical employees,
R&D is a binary variable for whether the workplace conducts research and development, and the variables TRN represent current year expenditures on training (t = 0) all
the way back to training expenditures made 6 years ago (t - 6). We include the Union
variable as a control variable because Acemoglu and Pischke (1998, 1999) suggest that
unionization may encourage firms to fund general training. According to Booth and
Zoega (2000) and Zwick (2004, 2006), firms with higher quality employees tend to have
more complex tasks and thus invest more in training, and therefore we include
Prof_Tech as another control variable.

Research methodology
Regression analysis
Stepwise regression was performed by industry. Decision makers are ultimately concerned with a financial or capital budgeting interpretation of the impact of training. So
below, we outline how the regression output was transformed into net present value
and internal rate of return calculations. To calculate the net present value of training
investment, some assumptions are necessary. Starting in 1999, an establishment decides
to invest in training. The relevant discount rate in 1999 is the prime rate which was
6.44 per cent (Bank of Canada, 2009). The use of the 1999 prime rate is based on the
following reasoning. The firm in 1999 has a decision to make whether to invest in
training or not. The Net Present Value (NPV) a priori of that training will be dependent
on the expected discount rate over the next 6 years. Thus, the firm cannot know the
average prime rate over the 6 years, since years two through six have not come to pass
yet. Our assumption is that the firm (somewhat naively) uses the 1999 prime rate to
make its calculation of NPV. Furthermore, we assume that training benefits will depreciate for two reasons: workers will forget what they learn over time (Lillard & Tan,
1992) and that knowledge becomes obsolete over time due to technological change
1

As a reviewer kindly pointed out, it would be best to control for initial level of human capital,
corporate restructuring, and the macroeconomic environment. Unfortunately, we were not able to
include such variables in our regression model.

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(Bartel & Sicherman, 1995; Dearden et al., 2000; Gerlach & Jirjahn, 2001, Zwick, 2006).
We make a simplifying conjecture that knowledge will depreciate on a straight line
bases to zero after 10 years. This conjecture is open to debate, however, other methods
of computing depreciation of knowledge using geometric decay yield similar results
(Almeida & Carneiro, 2008).
To calculate the NPV of training for each industry, we must first calculate the
derivative to total training with respect to productivity over the period 19992005.
To do this, the coefficients on the training variables (Trn_Cstt, Trn_Cstt-1, Trn_Cstt-2,
Trn_Cstt-3, Trn_Cstt-4, Trn_Cstt-5, Trn_Cstt-6) are summed, and we denote the result as
dY/dTrain. To obtain the elasticity (which is interpreted as the per cent change in
productivity due to a 1 per cent change in training), we multiply dY/dTrain by the
average training expenditure divided by the average labour productivity from 1999
2005. Then we assume that the elasticity will decay over a 10-year time span. We find
the NPV of the training elasticity over the 10 years with an initial investment of $1 (at
t = 0). Similarly, the internal rate of return is calculated from t = 0 to t = 10 with an initial
investment of $1 in training and a series of decaying training elasticities.
Data
We use Statistic Canadas Workplace and Employee Survey (Statistics Canada, 2004)
which contains responses from over 5000 Canadian firms over a 7-year period
from 19992005. Because the survey is mandatory, response rates are consistently
above 80 per cent reducing the concerns about sample size voiced by Tharenou et al.
(2007). Substantial information on the Workplace and Employee Survey (WES)
is readily available online (http://www.statcan.gc.ca/survey-enquete/businessentreprise/8104208-eng.htm). The description here will be necessarily brief; however,
the interested reader can check the Internet for more information. From its inception
the WES was designed to be a longitudinal survey conducted over multiple years. As
such, the questionnaire has undergone only minor changes since its inception. It
is a multifaceted survey with two components: an employer questionnaire and an
employee questionnaire. For the productivity analysis in this paper, we are only concerned with the employer (establishment). The surveys from 19992005 were linked via
an establishment level identifier variable called DOCKET. Establishments were sorted
by DOCKET in each of the seven surveys, and the files were then merged (not-forprofit establishments were excluded). Only establishments that had remained in the
sample frame for the full 7 years were retained in the linked data file. After cleaning, the
number of establishments was 3528 with 24,696 observations.
There are two types of training practices reported in the survey: classroom training
and on-the-job training. Each training method has 13 categories representing various
training practices. The 13 categories are the same for both in-class and on-the-job
training. These include: orientation for new employees; managerial/supervisor training; apprenticeship training; sales and marketing training; computer hardware; computer software; other office and non-office equipment; group decision making or
problem solving; team building, leadership, communication; occupational health and
safety, environmental protection; literacy or numeracy; and other training. Chief executive officers were asked to provide their total training expenditures for both on-the-job
and classroom training. It was not possible to discern how much was spent on classroom training versus on-the-job training, since establishments only report total training
expenditures. Thus, we only use total training expenditures in this analysis. In order to
analyse a time lag effect, training expenditures over the previous 6-year period were
lagged for each establishment. The means and standard deviations for all variables used
in the study can be found in Appendix II.

Results
The stepwise regression results by industry are reported in Table 2. Because the regression for business services had no significant variables, it is not reported. As in Table 1,
ROI for workplace training
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International Journal of Training and Development

Trn_Cst(-2)
Trn_Cst(-3)
Trn_Cst(-4)
Trn_Cst(-5)
Trn_Cst(-6)
N
R-Squared
F-Value
Pr>F

Intercept
Union
Prof_Tech
R&D
Trn_Cst
Trn_Cst(-1)

2,081
0.6756
120.37
<0.0001

-37.91# (26.04)
-37.24** (16.64)

47.02* (26.53)
102.88***
(27.68)
104.38*** (20.27)

153,330*** (16,119)

Finance, insurance

109.64***
-28.68
-125.04*** (35.58)
125.36*** (37.81)
-129.13 (49.84)
98.44*** (21.76)
-50.91** (19.97)
1,350
0.2250
7.43
<0.0001

168,588*** (20,298)
59,863# (41,278)

Communication,
utilities

Dependent variable: Labour productivity ($/employee)

439.94# (275.32)
1,065
0.1728
7.57
<0.0001

-630.53** (310.61)

-586.33# (373.33)
1,284.93***
(286.11)

482,530*** (146,650)

Forestry, mining, oil, gas

1,074
0.0883
4.74
0.0034

-181.62** (76.10)
476.41*** (130.62)

229,252*** (52,657)
-359,187*** (178,122)

Information, culture

1,444
0.2115
16.99
<0.0001

187.65*** (30.94)

118,232* (69,767)
121,421*** (39,648)

Primary product mfg

Table 2: Stepwise regression of labour productivity and training 19992005

1,706
0.3744
27.05
<0.0001

-158.34*** (28.01)
249.85***
(22.27)
-58.66** (24.88)

179,687*** (10,636)
119,880*** (38,372)
-71,944*** (26,222)

Capital intensive
tertiary

ROI for workplace training

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27

1,401
0.5754
90.81
<0.0001

505.76***
(45.28)

-121.33*** (44.98)
469.85***
(29.24)
-162.82*** (39.78)

3,262
0.2259
46.89
<0.0001

-300.65*** (56.78)
114.57*** (39.25)

253,450*** (18,265)

179,926*** (13,346)

Transport, warehousing

2,637
0.0224
8.66
0.0035

-212,211*** (72,128)

315,922*** (40,284)

Construction

Note: Business services is omitted. No variables were significant in the regression.

Standard errors in parentheses.
*** Significant at 0.01.
** Significant at 0.05.
* Significant at 0.10.
# Significant at 0.15.

Trn_Cst(-2)
Trn_Cst(-3)
Trn_Cst(-4)
Trn_Cst(-5)
Trn_Cst(-6)
N
R-Squared
F-Value
Pr>F

Intercept
Union
Prof_Tech
R&D
Trn_Cst
Trn_Cst(-1)

Secondary
product mfg

Dependent variable: Labour productivity ($/employee)

1,757
0.3248
28.62
<0.0001

53.092*** (15.95)
-27.19** (10.68)
1,157
0.1306
6.16
0.0001

109,106*** (9,810)
381,678*** (44,900)

Labour
intensive tertiary

115.00***
(29.14)
-111.61** (48.29)
102.71*** (34.10)

20.85*
(10.92)

112,300*** (6,273)
-55,847** (26,024)

Education,
health

Table 2: Continued

1,196
0.1334
8.21
<0.0001

305.67*** (77.77)
-75.28*
(43.99)

201,453*** (17,078)

Real estate

2,584
0.0783
32.63
<0.0001

147.88*** (25.89)

121,239*** (7,740)

Retail trade

for ease of interpretation, industries are ordered from highest to lowest average training expenditures (from 1999 to 2005). All estimated equations except for information
and culture, and construction are significant at the 0.0001 level. The Union variable is
significant in five out of 14 industries and negative in two. Prof_Tech, the proportion of
professional and technical trades in the workplace, is significant in three out of 14
industries and negative in two. R&D is only significant in one industry. If we make the
assumption that employers will only invest in training to the point where the marginal
cost of training is equal to the increase in the marginal value product of each employee,
then it would make sense that the returns to higher investing industries should be
greater than lower investing industries. Marginal cost is the dollar change in cost for
producing one more unit of output. More technically, it is the first derivative of the cost
function with respect to output quantity, where C(q) represents total cost as a function
of q, and marginal cost is given by: mc = dC(q)/dq. It may also be surmised that the
higher investing industries should exhibit a greater number of positive and significant
coefficients on the training variables. As expected, as we move from left to right in
Table 2 (from the highest training expenditure in finance and insurance, to the lowest
training expenditure in retail trade), the number of significant coefficients on the
training variables decreases.
Since the productivity (dependent variable) and training variables are all in dollars
per employee, the regression coefficients are easy to interpret. For instance, in the
finance and insurance industry one extra dollar spent per employee on current training
will increase labour productivity by $47.02 (see Table 2, second column).
Out of 14 industries, we were able to use regression results to calculate total training
elasticities for 12. Two industries business services, and construction, did not yield a
training impact on productivity. The total training elasticities in Table 3 represent the
impact on per employee productivity of spending one extra dollar (per employee) on
training. In the regressions shown in Table 2, the coefficients from t = 0 to t-6 are used
to create the elasticity. As shown in Table 3, with a discount rate of 6.44 per cent only
three industries finance-insurance, forestry-mining-oil-gas, information-culture, have
Table 3: Rate of return on training investment
Industry

Finance, insurance
Communication, utilities
Forestry, mining, oil, gas
Information, culture
Primary product mfg
Capital intensive tertiary
Secondary product mfg
Business services
Transport, warehousing
Construction
Education, health
Labour intensive tertiary
Real estate
Retail trade

Average training
expenditure
($/employee)

Elasticity*

NPV

IRR

430
327
299
264
240
233
204
204
173
168
151
118
114
84

0.42
0.06
0.41
0.37
0.25
0.03
0.2
n/a
0.16
n/a
0.09
0.12
0.12
0.1

0.53
-0.73
0.49
0.34
-0.06
-0.84
-0.23
n/a
-0.39
n/a
-0.61
-0.54
-0.53
-0.58

23%

22%
18%
4%

-2%
n/a
-8%
n/a
-18%
-15%
-14%
-17%

* Effect on productivity of spending one dollar on training.

Net present value of $1 spent on training in 1999. Prime rate for 1999 is 6.44 per cent. Assume
10-year straight line depreciation of training benefits.
Internal rate of return assumes 10-year straight line depreciation of training benefits.
IRR not feasible.

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a positive net present value for training investment. The internal rates of return for
training investment range from negative 18 per cent to positive 23 per cent. Financeinsurance has the highest ROI at 23 per cent, followed by forestry-mining-oil-gas at 22
per cent, information-culture at 18 per cent and primary product manufacturing at 4
per cent.

Conclusion
This study used longitudinal data comprised of 7 years of observations, over 14 industries and 3528 establishments. We have translated an organizational outcome measure
(productivity) into financial outcomes (NPV and ROI). We find that only three
industries finance-insurance, forestry-mining-oil-gas, information-culture, have a
positive NPV for training investment. The internal rates of return for training investment range from negative 18 per cent to positive 23 per cent. Finance-insurance has the
highest ROI at 23 per cent, followed by forestry-mining-oil-gas at 22 per cent,
information-culture at 18 per cent and primary product manufacturing at 4 per cent.
Tharenou et al. (2007) found in their review of the literature (67 studies on the
effect of training on firm outcomes) that more training has a small positive effect on
performance. They also found that earlier training expenditures still showed up in
current period performance measures. This indicates that training has long-lived benefits. In terms of financial effects, however, they found little evidence of impact. The
results of the meta-analysis of Tharenou et al. (2007) concurs with our productivity
analysis since 12 out of 14 industries had positive total training elasticities. However,
when the elasticities are put within a financial context and expressed as ROI, it was
found that only four industries showed positive internal rates of return. Thus
managers in these industries finance and insurance; forestry, mining, oil and gas;
information and culture; and primary product manufacturing should promote
investment in training. In contrast to the results in the present study, Nilsson (2010,
pp. 256-7) in a review of the literature, found that training on average increased both
productivity and profits. This difference may reflect the inclusion of costed on-the-job
training in the present study, whereas this remained unquantified in much of the
earlier research. Second, the industries in which we found no profitability effect had
much lower training expenditure than those in which the effect was found. It may be
that a low level of training expenditure is insufficient to trigger measurable financial
benefits.
What do the results signify to industries where training investment does not correlate with higher productivity? The study shows that training has little impact in
terms of financial effects. If training does not add financial value, why will companies
put money into it? Probably the best explanation is that new technology requires an
investment in training (Asplund, 2004; Bartel & Sicherman, 1995; Dearden et al., 2000;
Gerlach & Jirjahn, 2001; Zwick, 2006). The investment in training is necessary just for
the firm to maintain its current labour productivity. Employee turnover necessarily
impedes the efficacy of training, since trained workers leave and untrained workers
arrive. Thus, training in this instance again is necessary just to maintain current
labour productivity. Or it could simply be that training investments are so low that
they have no way of affecting productivity. For instance, in the real estate industry,
training investments amount to 0.05 per cent of productivity per employee. Or the
results may indicate that there are some other factors at work other than training. It
may be practical for some industries, such as fast food, to under invest in training
because of historically high-turnover and low-employee loyalty. This may help
explain the lack of results in real estate and retail trade, yet other industries such as
education and health are characterized by good pay and status. Anomalies such as
these remain for further in-depth analysis. One of the major limitations of the study
is the relatively short time span our panel data cover. Also, as a reviewer pointed out,
some important control variables are absent from our regression equations. However,
at this time, no replacement survey for WES (which was discontinued in 2006) has
been announced.
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2013 Blackwell Publishing Ltd.

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Appendix I
In the economics of education literature the educational production function is well
known (Johnes & Johnes, 2004). In essence education is an independent variable in a
production function framework where Y is output, E is educational attainment of the
workplace, and X are other relevant variables (such as sex, age, occupation). So we have:
Y = f(E, X). However, Y can be gross output (i.e. sales, net sales) or output per worker
(i.e. labour productivity which is sales per worker). The model we use in the paper is
admittedly incomplete, because we do not have a variable for educational attainment
the variable PROF_TECH is a proxy for educational attainment as it measures the
proportion of employees who are in the professional and technical disciplines in the
firm (i.e. these individuals possess either community college or university training).
Our model is specified as: Y = f(TRN, PROF_TECH, UNION, R&D), where TRN is
training expenditure per employee in the current as well as previous years, UNION is
the proportion of unionized workers and R&D is a binary variable for whether the firm
conducts R&D or not.

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International Journal of Training and Development

PROF_TECH
UNION
TRN_CST
TRN_CST1
TRN_CST2
TRN_CST3
TRN_CST4
TRN_CST5
TRN_CST6

LPROD
RandD

Labour productivity in dollars per employee.

Coded as 1 if strategic importance of R&D was critical, very
important or important otherwise it was coded as 0
Percentage of employees classified as professional or technical
Percentage of unionized employees
Current year training expenditure dollars per employee (t = 0)
Last years training expenditure dollars per employee (t-1)
Training expenditure lagged two years dollars per employee (t-2)
Training expenditure lagged three years dollars per employee (t-3)
Training expenditure lagged four years dollars per employee (t-4)
Training expenditure lagged five years dollars per employee (t-5)
Training expenditure lagged six years dollars per employee (t-6)

Description

Table A1: Regression variables

Appendix II

0.1841
0.0825
166.29
175.80
174.63
168.45
169.32
175.21
218.35

178,473.22
0.0374

Mean

0.2771
0.2388
506.14
509.09
506.55
490.94
475.89
482.90
558.31

295,872.83
0.1898

Std Dev

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